Advanced Micro Devices Inc. (NYSE:AMD) is set to report FQ1 2014 earnings after the market closes on Thursday, April 17th. AMD is a large semiconductor company, which produces computer processors, motherboard chipsets, graphics processing units, and other hardware products. AMD along with its competitor Nvidia (NASDAQ:NVDA) dominate the GPU market. This quarter, Wall Street is expecting a strong earnings report out of AMD to the tune of 22.9% year over year revenue growth. In FQ1 last year, AMD reported a loss but still beat analysts' expectations. This quarter the Street expects AMD to erase its losses and post 0c EPS. Here's what investors expect from AMD Thursday.
The current Wall Street consensus expectation is for AMD to report 0c EPS and $1.337B revenue, while the current Estimize.com consensus from 33 Buy Side and Independent contributing analysts is 2c EPS and $1.361B in revenue. This quarter the buy-side as represented by the Estimize.com community is expecting AMD to beat the Wall Street consensus on both EPS and revenue by a small margin.
Over the past 6 quarters, the consensus from Estimize.com has been more accurate than Wall Street in forecasting AMD's EPS and revenue 4 times each. By tapping into a wider range of contributors including hedge-fund analysts, asset managers, independent research shops, students, and non-professional investors, Estimize has created a data set that is more accurate than Wall Street up to 69.5% of the time, but more importantly, it does a better job of representing the market's actual expectations. It has been confirmed by Deutsche Bank Quant. Research and an independent academic study from Rice University that stock prices tend to react with a more strongly associated degree to the expectation benchmark from Estimize than from the Wall Street consensus.
The magnitude of the difference between the Wall Street and Estimize consensus numbers often identifies opportunities to take advantage of expectations that may not have been priced into the market. In this case, we are seeing a small to moderate difference between the two groups' expectations. Click to enlarge
The distribution of estimates published by analysts on the Estimize.com platform range from -3c to 10c EPS and from $1.321B to $1.421B in revenues. This quarter, we're seeing a large distribution of EPS estimates and a moderate range of revenue estimates on AMD.
The size of the distribution of estimates relative to previous quarters often signals whether or not the market is confident that it has priced in the expected earnings already. A wider distribution of estimates signaling less agreement in the market, which could mean more volatility post earnings. Click to enlarge
Over the past 4 months, the Wall Street EPS consensus inched higher from -1c to 0c, while the Estimize consensus rose from -1c to 2c. Meanwhile, Wall Street lowered its revenue consensus by $51M while the Estimize community kept its expectations relatively flat. Timeliness is correlated with accuracy at the end of the quarter both groups were comfortable in keeping their consensus expectations flat. Click to enlarge
The analyst with the highest estimate confidence rating this quarter is turbinecity, who projects 1c EPS and $1.343B in revenue. turbinecity was our Winter 2014 season winner and is ranked 6th overall among over 4,100 contributing analysts. Over the past 2 years, turbinecity has been more accurate than Wall Street in forecasting EPS and revenue 59% and 55% of the time respectively 1644 estimates. Estimate confidence ratings are calculated through algorithms developed by deep quantitative research, which looks at correlations between analyst track records and tendencies as they relate to future accuracy. In this case, turbinecity is expecting AMD to miss the Estimize community's expectations on both EPS and revenue.
Last year in FQ1, AMD lost 13c per share, this time around, the Estimize community expects a profitable quarter. On Thursday, the Estimize community is looking for year over year gains of 15c in EPS and a substantial $273M (25% increase) on revenue.